Disappointing Figures Revealed
Warner Bros. Discovery (WBD) faced scrutiny as it reported a larger-than-expected loss of 40 cents per share in the first quarter of 2024, wider than the 24 cents per share predicted by the Zacks Consensus Estimate. This marked a deterioration from the 44 cents per share loss in the same quarter the previous year.
The company’s revenues also took a hit, showing a 6.9% decline year-over-year to $9.95 billion. The actual figure fell short of the anticipated $10.28 billion, according to the Zacks Consensus Estimate.
Ad revenues were particularly abysmal, plunging 6.5% year-over-year to $2.14 billion. Distribution revenues saw a 3.4% decrease to $4.98 billion, while content revenues took a major hit, declining by 13.4% to $2.55 billion. On a slightly brighter note, other revenues showed a modest 6.3% increase from the previous year, landing at $267 million.
A Closer Look at Financials
The Studios division, making up 28.3% of total revenues, reported a notable drop in earnings, raking in $2.82 billion – a 12.2% decrease from the previous year. This segment faced challenges with content revenues falling by 14%. The setback was attributed to a decline in games revenues, alongside weaker TV earnings due to production delays.
On the brighter side, Theatrical revenues showed a significant increase, driven by the success of films like Dune: Part Two and Godzilla x Kong: The New Empire. These movies boasted over $1.2 billion in global box office sales collectively, with Dune: Part Two securing a spot as the highest-grossing film of 2024.
The Networks segment, accounting for 51.5% of total revenues, witnessed an 8.2% decline to $5.12 billion. The departure of AT&T T SportsNet had a notable negative impact on revenue growth. Distribution revenues dipped 6% due to reduced U.S. pay-TV subscribers, while advertising revenues took an 11% hit.
Subscriber Metrics and Financial Position
Warner Bros. Discovery closed Q1 of 2024 with 99.6 million global DTC subscribers, marking a 2 million increase from the previous quarter. ARPU stood at $7.83, up 4% year-over-year excluding FX effects.
The balance sheet reflected cash & cash equivalents of $2.97 billion by March 31, 2024, a decline from $3.78 billion at the end of the previous quarter. Gross debt totaled $43.2 billion with a net leverage of 4.1x.
Final Thoughts on the Market
Despite the lukewarm performance, Warner Bros. Discovery currently holds a Zacks Rank #3 (Hold). Investors looking for more favorable options in the Consumer Discretionary sector can consider stocks like Manchester United (MANU) and Netflix (NFLX), both carrying a Zacks Rank #1 (Strong Buy) at present.
While Manchester United has faced a 24% decline in shares this year, the company is expected to see a 5.83% year-over-year increase in revenues for 2024. Netflix, on the other hand, has seen a 25.2% jump in shares year-to-date and anticipates a revenue growth of 14.69% for 2024.
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